October 29, 2010

Let’s start a collateral exchange

One of the biggest struggles that small business owners face today when they are looking to borrow money – is coming up with enough collateral.

Depreciated real estate values and stock accounts make it tougher and tougher for the small business owner to find the collateral they need to get the loan done.  At MultiFunding, we often ask our clients if they have a family member or friend who they could ask to put up some collateral for the loan.  And more often the answer is NO.   Either everyone they know is also strapped, or they are simply too embarrassed to ask.

The collateral crisis creates an opportunity.  A lot of these companies that can’t come up with the collateral have strong cash flowing businesses.   Many are in the service industry and don’t have many tangible assets on their balance sheet.

We would love to see an exchange platform where folks with collateral could offer to put it up, in exchange for warrants or upside in a particular business that they like.  The idea is that a small business owner in need of collateral would post their business plan, their collateral need, and offer some upside in exchange for it.  The investor would put up the collateral (and take the risk if the company blows up), but not have to put up cash.

Is anyone interested in exploring this idea? I will be your loudest advocate. Just don’t have time to do this myself.

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